Page 12 - NorthAmOil Week 30

NorthAmOil COMMENTARY NorthAmOil

affected existing operations, while new drilling What next?
is predicted to remain limited. Nonetheless, a These early signs of recovery are being tempered
period of relative oil price stability – with West by warnings about ongoing headwinds, however.
Texas Intermediate (WTI) currently above $41 Rystad does not expect the rig count decline to
per barrel – has helped restore some confidence reverse into week-on-week increases right away,
among drillers, prompting them to step up for example.
work. “We anticipate nationwide horizontal oil
It is not only drilling that appears to be grad- drilling will remain relatively flat in the next few
ually recovering – completions are also on the weeks, as some operators continue to imple-
up. Consultancy Rystad Energy said last week ment modest downward adjustments, while
that there had been a “shocking” decline in others have started restoring drilling opera-
new hydraulic fracturing operations, with just tions in the current $40 WTI price environ-
325 wells completed in June, but added that ment,” Rystad’s head of shale research, Artem
the number was now set to rise again. Rystad Abramov, commented.
projects that over 400 wells will be fracked in And investment bank Tudor, Pickering, Holt It is not only
July. The consultancy cited its own satellite data & Co. (TPH) expects the rig count to “find a bot-
as showing 246 newly started frack jobs in the tom soon, with incremental rig adds beginning drilling that
month up to July 23, with 96 of these begin- to materialise towards the back half of the third appears to
ning the previous week. It also uses data from quarter”.
FracFocus. Meanwhile, the US Energy Information be gradually
It is worth noting, however, that before the Administration (EIA) anticipates that both oil
downturn started, frack job numbers across the and gas production in the country will fall again recovering –
US tended to be above 1,000 per month, so the in August compared with July. There is less cer-
shale industry still has a long way to go in its tainty over what happens beyond August, how- completions are
recovery. ever, especially as curtailed production from also on the up.
Rystad noted that the recovery in fracking OPEC+ countries comes back online, putting
activity was much more evident in the Permian new downward pressure on oil prices from the
Basin than other shale regions. This is unsur- supply side. On the demand side, meanwhile,
prising given the extent to which the Permian the risk of a new wave of COVID-19 outbreaks
dominated shale – and overall US – production – and lockdowns aimed at containing the virus
prior to the downturn. The basin’s stacked plays, – continues to hang over the market.
comparatively low breakeven costs and prox- Despite these concerns, however, the first
imity to the refining and export infrastructure rise in the US oil rig count in 18 weeks has been
on the Gulf Coast have given it a competitive held up as a positive sign for the industry. Baker
advantage over other shale regions that persists Hughes’ next update of rig numbers – due for
to this day. release on July 31 – will be closely watched.™

P12 www. NEWSBASE .com Week 30 30•July•2020